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UK adults plan to spend the same, if not more in retirement – demonstrating the importance of pension saving

More than one in five (23%) say they have a good idea of the discounts and subsidies available for retirees. But one in four think rail travel (24%) and spectacles (25%) are free for retirees, when in fact they are only discounted.

One in seven (15%) believe they won’t have to pay any council tax when they are retired, while 42% think there is a discount. In reality, only those aged 65 and over receiving pension credit (an income related benefit) or those living on their own are eligible for a discount on council tax.

Other products that UK adults expect to receive for free in retirement are broadband (11%), water rates (9%), pet insurance (8%), package holidays (7%) and pet food (7%). More than a fifth mistakenly think pet insurance (22%) and broadband (24%) will be discounted when they are retired, with a predicted price reduction of almost a third (30%).

One in seven (15%) believe they will be given social care or will be looked after in a care home for free, while 32% are expecting a discount. Local councils contribute towards care costs on a means tested basis, social care is not free1, and anyone living in England with capital and savings above £23,250 will have to fund all of their own social care, although they are likely to qualify for some allowances. This demonstrates the need to provide public clarity on how social care funding works.

A quarter (25%) of UK adults already say they will struggle to live off their pension despite the discounts and subsidies available for retirees. With many overestimating the help they will receive, this struggle could be even more pronounced in reality.

Table 1: UK adults indicate whether they think it’s possible for retirees/over-65s to receive discounts or free services, or have to pay full price, on a range of products/services

Full price

Discounted

Free

NHS sight tests

13%

25%

62%

Dental treatment

27%

36%

37%

TV licence

42%

30%

29%

Bus or tube travel

11%

32%

57%

Rail travel

17%

60%

24%

Coach travel

22%

58%

21%

Spectacles

24%

51%

25%

Council tax

43%

42%

15%

Broadband

65%

24%

11%

Pet insurance

71%

22%

8%

Pet food

78%

16%

7%

Water rates

60%

31%

9%

Library book fines

61%

23%

16%

NHS prescriptions

14%

24%

62%

Package holidays

64%

29%

7%

Social care/care home

52%

32%

15%

Cinema tickets

33%

60%

7%

Entry to attractions

22%

70%

8%

Correct answers are in bold2.

UK adults expect to spend the same, if not more, in retirement

According to Aviva’s research, UK adults are currently spending £917 a month on running a home (excluding rent or mortgage costs), food, travel and holidays, family days out and hobbies.

The majority of UK adults say they expect to spend the same on common areas of spending when they retire. However, nearly a third (32%) believe the amount they will spend on running a home will increase, while 29% expect to increase spending on hobbies.

Table 2: UK adults estimate whether they will spend less, more or the same in retirement

More

Less

The same

Costs of running a home

32%

18%

47%

Food

24%

24%

50%

Travel and holidays

28%

23%

44%

Family days out etc.

25%

22%

47%

Hobbies

29%

14%

48%

A common reason for increased expenditure on essential items is the rising cost of living, with this being given by 40% who expect to spend more on food, and 37% who will spend more on home costs. Others say it is because they will be at home more so will be forced to increase their expenditure, with this being particularly true of those who expect spend more on running their home (60%).

For non-essential items such as travel (48%), family days out (41%) and hobbies (38%), the most common reason for spending more cited by those who expect to do so is the fact they will have more spare time to fill.

However, not everyone will be able to up their spending in retirement. The most common reason for cutting down expenditure in retirement is having less to spend due to reduced pension income. This is given by more than two in five of those who expect to spend less on hobbies (45%), family days out (43%), running a home (43%), food (43%) and travel and holidays (41%).

Alistair McQueen, Head of Savings and Retirement at Aviva, comments:

“Older generations benefit from a range of discounted or free products and services, but our research suggests many people expect these to be more generous than they actually are. Consumers leaning too heavily on incorrect assumptions about subsidies and discounts may be in for an unpleasant surprise when the financial realities of retirement finally dawn.

“The fact that some people are depending on fictional discounts to make their retirement more affordable – or anticipate struggling despite these benefits – paints a worrying picture of consumers being poorly prepared for the financial demands of retirement. Most people expect to spend the same as they do now, if not more, once they have retired, with rising inflation playing a key role. Those who experience a dramatic fall in income once they retire are therefore likely to struggle.

“It’s crucial that people plan ahead for retirement, considering their future budget needs, and understanding the discounts and benefits that could be available. Poor planning and misguided assumptions are likely to lead to disappointment in retirement.”

Visit the Aviva Shape My Future tool to help you plan what your retirement income might be, how much the lifestyle you want could cost, and how you might make it happen.

Aviva’s spokesperson, Alistair McQueen, is available for comment/interview.

Notes to editors:

The research was conducted by Censuswide, with 2,030 UK adults aged 18+ in GB between 7th and 10th April 2017 (completed before political party manifestos were published and therefore does not represent awareness of what was subsequently announced). The survey was conducted from a random sample of UK adults. Censuswide abide by and employ members of the Market Research Society which is based on the ESOMAR principles.

These rules maybe subject to change given the consultation that has been announced on the funding model for social care.

2 A range of Government, charity and provider online sources were used to establish the discounts available to retirees/over-60s.

Aviva provides life insurance, general insurance, health insurance and asset management to 33 million customers, across 16 markets worldwide

In the UK we are the leading insurer serving one in every four households and have strong businesses in selected markets in Europe, Asia and Canada. Our shares are listed on the London Stock Exchange and we are a member of the FTSE100 index.